A periodic-review inventory model with application to the continuous-review obsolescence problem

• Main Authors: SONG, Yuyue, LAU, Hoong Chuin
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2004
• Subjects: Inventory model; Sudden obsolescence; Continuous-review; Periodic-review; Artificial Intelligence and Robotics; Operations Research, Systems Engineering and Industrial Engineering
• Online Access: https://ink.library.smu.edu.sg/sis_research/64; https://ink.library.smu.edu.sg/context/sis_research/article/1063/viewcontent/ObsolescenceEJOR.pdf
• Institution: Singapore Management University

In this paper we consider a stochastic-demand periodic-review inventory model with sudden obsolescence. We characterize the structure of the optimal policy and propose a dynamic programming algorithm for computing its parameters. We then utilize this algorithm to approximate the solution to the continuous-review sudden obsolescence problem with general obsolescence distribution. We prove convergence of our approximation scheme, and demonstrate it numerically against known closed-form solutions of special cases.